Asia's Latest Miracle

By Michael Schuman / Seoul Monday, Nov. 15, 2010
    • Photograph by Jean Chung for TIME

    Seoul-ful The capital's glittering cityscape reflects a very happening place

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    Kang would know. In 1999, George Soros purchased control of a brokerage then called Seoul Securities and plucked Korean-American Kang from Wall Street and inserted him as CEO. Kang created an instant stir. CEOs in Korea were expected to work their way up the seniority-based corporate ladder, and the incumbent managers at Seoul Securities were outraged that a 37-year-old outsider was now their boss. Local media got wind of his Wall Street — level compensation, and he got dubbed "the $3 million man." Kang became a symbol of evil foreigners taking advantage of Korea's moment of weakness.

    Kang had entered a securities industry that didn't operate by international standards. Poorly trained brokers would flog stocks to old ladies based on rumor and press clippings. Kang got to work applying what he had learned on Wall Street, cleaning up the firm's risk management and expanding and strengthening new businesses like institutional sales and investment banking. As profits rose at Seoul Securities, other brokerages copied Kang's imported ideas. The industry has changed so much, Kang says today, that if he arrived now as CEO he wouldn't create nearly the same commotion. Koreans "are much more open, have much more global experience," says Kang. "That's the real drama. You can talk about government policies, but [the difference] is the people."

    What happened in the securities industry was replicated in other sectors. The 1997 crisis broke apart the cozy government-banking-corporate networks, forcing the big companies to become truly profitable, independent and internationally competitive for the first time. That process was egged on by a new influx of foreign money, ideas and people. Foreign investors began to play a much larger role in the domestic economy, increasing competition. Korean companies brought low by the financial crisis in banking, autos and other industries were sold off to international giants. Storefronts in Seoul now boast more foreign names than I thought possible in the 1990s, from H&M; to Kate Spade to Zara. After Apple's sudden success in a Korean economy where foreign handsetmakers had almost no presence — its iPhones claimed more than a quarter of the local smart-phone market in the first half of 2010, according to research firm IDC — Samsung was pressed to accelerate its own product development. The number of foreigners living in Korea has exploded, from fewer than 250,000 in 2000 to more than 870,000 in 2009. Business before the financial crisis "was more like a club," Kang says. Now "there's a lot more competition, and that's forcing people to be innovative. If they don't, they're going to die."

    That reality altered Korea Inc.'s view of the world, and made its companies fiercer competitors. Korean corporate offices used to be for Koreans only, but now firms like carmaker Hyundai Motor recognize they have to be more open to outsiders and foreign ideas to compete on a global scale. "When we went to overseas markets, we tried to control everything from headquarters and by Korean staff; most [Korean] companies were doing that," says Han Chang Hwan, a senior vice president who spent much of the past 12 years posted in the U.S., India, Malaysia and Germany. "Ten years ago, the president of Hyundai Motor America was a Mr. Kim or a Mr. Park. We realized it was ridiculous. Nowadays, all the overseas subsidiaries are handled by local staff. It is a process of globalization." That's made Hyundai much more responsive to local markets and creative in its sales efforts. During the worst of the Great Recession in early 2009, for instance, the U.S. operation offered to take back Hyundais from buyers who lost their jobs. The marketing coup was devised entirely by Hyundai's U.S. managers and likely helped the company outperform its rivals during the downturn. Hyundai is even integrating foreign experts into its Seoul management team. Now the headquarters cafeteria offers salads, steaks and other Western dishes at lunchtime. "In the 1990s, we couldn't imagine!" Han exclaims.

    Breaking Down Barriers
    That same attitude also bolstered the career of my friend Sue Kim. I met Kim only days after my 1996 arrival in Seoul, when she was a young media-relations staffer for the chairman of the LG group of companies. Soon after we met, she told me that she intended to become a top executive at an LG company. That sounded absurd. Female senior managers at big corporations were practically nonexistent. Most women were relegated to minor tasks and expected to quit after they got married. For those bold enough to stay on, Korean corporate culture made it almost impossible for them to get ahead. Unlike her male counterparts, Kim was required to wear a uniform, a practice she found so embarrassing that she changed into business suits whenever she left the office. After work, her male colleagues would often bond at hostess bars called room salons. Kim was left out. But she persevered: she felt she was offered a rare opportunity to show just how valuable women could be to Korean companies. "I felt responsible, that I had to do well," she says. "I wanted to prove myself, that I'm not different from my male peers."

    She succeeded. In March this year, Kim, 39, was promoted to bujang , or senior manager, in the investor-relations department of LCD-panel maker LG Display, at a pace somewhat faster than that of many of her male counterparts. The rank is so lofty that many managers never get promoted again, if they even make it up that high. Kim's climb was partly due to her willingness to play the game. To endear herself to her officemates, she would often join them in after-work power-drinking sessions, occasionally downing 10 boilermakers in an evening. But she also believes the old prejudices against women are slowly melting away because of the trials of global competition, which, Kim says, are forcing Korean executives to place merit over gender. "Korean companies look at their employees by what they can bring to the table," Kim explains. "As the global market becomes fierce, the focus has been on maintaining talent rather than the old discrimination."

    Other biases are evaporating. When I lived in Seoul, smart, young Koreans had a very narrow path to success: study your brains out in high school, pass the tough exams necessary to get accepted at one of a handful of elite universities, then join the government or a big company like Samsung or Hyundai. Anything else was considered an embarrassment in Korean social circles, and parents usually dissuaded their sons from charting their own course. Not anymore. Koreans have become much more accepting of different life choices. That's encouraged an army of young people to start their own companies, often in innovative IT or high-tech businesses.

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